It’s Not Easy Being Green: Litigating Environmental Disasters

By Larry Reibstein

When University Professor Richard Stewart first learned of the BP oil well explosion in April 2010, he thought, Here it goes again. Stewart played a central role in the $1 billion settlement for the Exxon Valdez disaster in 1989. Then a Justice Department assistant attorney general, Stewart spearheaded both the criminal and civil actions brought by the U.S. against Exxon. He adopted a unified strategy with the state of Alaska—to avoid any Exxon divide-and-conquer maneuver—and managed to deal with at least five U.S. agencies, three of whom vied for restoration monies. “It was a very complex process of keeping things together,” he says. “It was not easy. Not easy.”

And yet, on paper at least, settling the BP litigation could easily surpass Exxon’s in difficulty. Five states are involved as plaintiffs, and there are a number of potential defendants, including Halliburton and Transocean, in addition to BP. And unlike the pristine Prince William Sound, Stewart notes, the Gulf of Mexico was already “beaten up,” making it difficult to pinpoint BP’s responsibility.

For starters, Stewart suggests that officials borrow a page from his Exxon strategy: Push for a global settlement of all criminal, civil, and natural resources claims. Such an approach would “avoid potentially immense litigation delay and expense,” Stewart testified in September 2010 before the national commission investigating the spill. “Most important, a global settlement could deliver restoration resources to the Gulf more rapidly.”

At press time, the parties in the BP spill were making progress toward such a settlement. In April, BP agreed to pay $1 billion to begin restoration work in the Gulf. Stewart lauded the preliminary agreement, but says he’s concerned that the money will be allocated evenly among the affected states even though the Louisiana coast is the top restoration priority. “It’s not clear the political logic matches the ecological needs,” he says.

Indeed, Stewart notes that questions on how settlement money gets spent and who makes the decisions can easily turn into a bruising free-for-all. In Exxon, Stewart says the Department of Justice wanted large fines for deterrent effect, while government agencies wanted a big slice to go for restoration, as did Exxon (it’s tax-deductible and good public relations). In the end, there were large fines and criminal restitution, but the money was mostly targeted for restoration costs.

In Exxon, a six-person body of both federal and Alaska representatives made the spending decisions. Stewart told the oil spill commission that the number of parties in the BP case would make that arrangement unworkable. He urged instead that the president appoint one person for federal decisions on restoration while the states collectively do the same.

The bigger lesson here, Stewart says, is how to prevent such disasters in the first place. The threat of big sanctions to create an incentive for corporations to act responsibly clearly didn’t work, he says. The answer may include special training for rig operators, such as the training that airline pilots and nuclear workers receive, and targeted incentives for innovation in safety. “Torts are not enough,” Stewart says. “Liability alone is not going to do the job.”